Business Process Re-engineering

When electricity was first popularized at the beginning of the 20th century, there was a huge wave of factories that replaced their steam engines with electrical engines in an effort to increase productivity and modernize operations. However, the initial productivity gains from the electrification were barely noticeable – a phenomenon known in the economics literature as the productivity paradox and popularized by Stanford economist Paul David.

When researchers tried to find out why, they found that the electrification of factories basically involved the replacement of steam engines and pipes with dynamos and wires while everything else remained the same. It took a long time for industrial engineers to realize that the beauty of electricity didn’t rely only on the fact that it was a cheaper, more powerful and dependable source of energy but also that it allowed them to completely rethink the manufacturing process. Industrial engineers and plant managers eventually realized that thanks to electricity they now could move machines in ways that allowed workers to work more efficiently, change the layout of the factory or create an assembly line.

And it was then and only then, through the combination of new technologies and better processes, that productivity finally increased.

We at the Integration & Trade Sector face a similar challenge. During the initial discussions about the scope and needs of a new trade modernization project, a large portion of the dialogue focuses on the infrastructure and technology without fully reflecting on the changes in processes that will be required.

Just like we saw during the industrial electrification, to get the most out of your IT investment, it is imperative to also modernize the processes that determine how things are actually done.

That is precisely why our trade modernization projects usually begin with a thorough business process reengineering (BPR). Exporting and, especially, importing goods in developing countries is a feat of formidable complexity. Traders must comply with a myriad of redundant government regulations issued by different government agencies characterized by the lack of coordination and, in many occasions, subject to the discretionality of the officers.

So what have we learned from the reengineering and implementation of new processes? Although every BPR is different, here are 7 lessons learned:

Very few people understand the whole process

When conducting the mapping and reengineering of processes, we have found that very few people understand the end-to-end process. Government officials may understand their own piece but not how the entire process works from beginning to end. In trade, this is particularly problematic given the multitude of government agencies involved in the export-import process. Contrary to popular belief, customs administrations are only one administration, although an important one, involved in the import-export process. As a matter of fact, data from the World Bank indicates that customs administrations are only responsible for ⅓ of the delays at the border, and United Nations estimates that the average transaction requires 40 documents and 200 data elements (60-70% of which are re-entered at least once). Therefore, it is critically important to have a holistic approach and a clear understanding of the whole process so that the intervention can eliminate all bottlenecks and not just those on any given administration.

Blame the process, not the people

When you focus on a business process, it appears less threatening than focusing on the employees who do the work. Identifying bottlenecks and cumbersome bureaucracy and linking them to the process instead of to particular employees leads to less threatening and more palatable solutions.

Regulation 2.0

The changes in processes must not be constrained by what the current regulatory framework allows, but instead follow international best practices. This will inevitably require some sort of automation, digitalization of paper forms, data exchange, electronic payments and signatures, and thus substantial changes in the regulatory environment. Therefore, a good BPR must also indicate the changes needed in terms of legislation and regulation in each administration.

If you want to go fast, go alone. If you want to go far, go together

Process reengineering affects the entire ecosystem of all administrations involved, that’s why it is of paramount importance that the whole organization embraces the BPR as their own initiative. Although there is not a magic recipe for this, a good way to help developing a sense of ownership are interactive and regular meetings across all levels of the administration. These meetings, properly executed, represent a great opportunity to gain supporters and also involve everyone in the process asking for recommendations and suggestions. Similarly, an incremental implementation of the changes and a detailed explanation of why they’re needed not only give people peace of mind but it helps minimize the possibility of rumors that may undermine the process. The employee must be an active participant in the process and not a witness of it. Real change happens from the inside and it is naive to believe that a consultant or consulting firm is going to bring about structural changes without the support of the workforce.

Anticipate the impact and develop tailor made solutions

Many government agencies derive their revenue, all or in part, from paper-based processes. Therefore automation essentially kills their main source of funding (and power). A good BPR will anticipate these objections and develop a well thought out solution with all parties involved. Similarly, some government agencies are more mature than others in terms of IT use, so it is essential to identify at an early stage the agencies that will require more financial support and training and budget accordingly.

The cost of inaction is key

Identifying the weaknesses and bottlenecks of the current processes and recommending new ones is not enough to prompt organizations to take action. Ideally, a good BPR should not only highlight the potential gains from the implementation of the new processes, but also estimate the cost and lost revenue that the status quo is causing. For example, in a recent BPR we detected significant loopholes in the import process of luxury vehicles, oil and dry bulk cargo that were costing the government millions in lost revenue. I cannot emphasize enough this point. Humans are hardwired to be risk averse and research has proven time and time again that we feel the pain of loss more acutely than we feel the pleasure of gain (it’s what behavioral economists and psychologists call loss aversion). Bottom line: when the cost of inaction is higher than the cost of action, people take action.

Excellence is a habit, not an act

The BPR must not be seen as a one-time activity, but as a new philosophy of doing things. International trade changes constantly and that is why it is important to develop a culture of continuous improvement where employees are incentivized to constantly refine processes.

Cutting a jungle path through thousands of pages of overgrown and, in some cases, outdated government regulations is a tedious and titanic effort. If looked at individually, every inefficient process might seem benign and trivial at first sight, and therefore it is no wonder that they are frequently overlooked. Plus it is always difficult to fight against the inertia of the past. However, we must not underestimate the impact of seemingly small things as we can see in the following image:

We must not underestimate the impact of seemingly small things.

Furthermore, policy makers must analyze the impact of processes as a whole, and not just individually or by administration. It’s only through a careful and methodical analysis of all processes when we are actually able to appreciate the magnitude of the problem, and the cumulative effect of the process ecosystem. As the proverb goes, no snowflake in an avalanche ever feels responsible.

Finally, governments and nations cannot choose their natural resources or their neighbors. But they can definitely choose how they conduct businesses and interact with the civil society, private sector and the rest of the world. Every government has a moral responsibility to design and provide the best services possible to their citizens no matter how trivial they may seem. As John F. Kennedy once said, not everybody is in a position to do extraordinary things, but we can all do ordinary things in extraordinary ways.

The concept of business process reengineering (BPR) is to rethink and break down existing business processes. This allows a company to reduce costs and improve productivity through newer, more efficient processes. It is important to remember however, that though there are instances where this is necessary, business process reengineering is not without its disadvantages. This makes it vital to weigh your decision carefully. One of the most obvious adverse effects of a company’s decision to reengineer is a lowered employee morale. Most people are vary of change and do not manage to adapt to it easily. This aspect needs to be kept in mind when trying to make the decision to go through with the activity.

In this article, we will discuss:

The history of business process reengineering

The steps to help you implement business process reengineering

Successes and failures of business process reengineering

Some famous examples.

HISTORY OF BUSINESS PROCESS REENGINEERINGBusiness process reengineering, also called BPR, is the redesign and analysis of workflow, in an effort to make it more efficient.

In the early 1990’s, Michael Hammer and James Champy published a book, “Reengineering the Corporation”, that stated that in some cases, radical redesign and reorganization within a company were the only way to reduce costs and improve service quality. To this end, they said, information technologywas the key element for allowing this to happen.

Hammer and Champy said that most large companies made (now invalid) assumptions about their goals, people and technology that were impacting the workflow. They suggested seven principles that could be used to reengineer and help streamline workflows, thus improving quality, time management and cost.

Hammer and Champy suggested the following seven principles in their book.

Organize around outcomes, not tasks.

Identify all the processes in an organization and prioritize them in order of redesign urgency.

Integrate information processing work into the real work that produces the information.

Treat geographically dispersed resources as though they were centralized.

Link parallel activities in the workflow instead of just integrating their results.

Put the decision point where the work is performed, and build control into the process.

Capture information once and at the source.

What does this mean in simpler language? Essentially, for a successful BPR effort, it is important to look at all the tasks that are working to achieve the same goal. This exercise can then allow several jobs to be combined into one. In addition, parallel processes leading to the same outcome should be connected within the process rather than just combining results at the end. Also, it is important to look at all available resources and place the actual work where it makes the most sense.

To make the process most efficient, the power to make decisions regarding it should be given to the people performing the process and any unnecessary control systems should be eliminated. Instead of having extra processes to record information relating to the process, a resource within the process should provide all necessary data to increase accuracy and reduce redundancy.

HOW TO IMPLEMENT BUSINESS PROCESS REENGINEERING IN YOUR BUSINESSThe following steps (Davenport, 1992) can help BPR realize its core principles of customer satisfaction, reduced costs of business and increased competitiveness.

1. BUSINESS VISION AND OBJECTIVESAny BPR activity needs to begin with a clearly defined and measurable objectives. Whether the goal is reducing costs, improving quality of product, or increasing efficiency, the framework for what needs to be achieved has to be decided upon at the outset, in line with the company’s vision and mission.

2. IDENTIFICATION AND SLACKING PROCESSESOnce a clear goal is in mind, all processes need to be studied and those seen as ‘slacking’ or that can be improved need to be identified. Among these, those processes with direct impact on the company’s output or those that clash with the company’s mission become part of the ‘red’ list. This clear identification makes the difference between BPR success and failure.

3. UNDERSTAND AND MEASURE THE ‘RED’ PROCESSESWith a list of slacking processes in hand, it is imperative to identify how they were identified as such. Are they taking too much time to complete? Is the quality of the outcome being compromised? Whatever the issue, each process must be judged objectively either against industry standards or ethically obtained competitor best practices.

4. INFORMATION SYSTEM AND TECHNOLOGY CAPABILITIESAn efficient and relevant IT system is an essential BPR enabler. Without such a system, it is not possible to keep a check on all factors affecting the change. Before setting out on a radical BPR activity, it is vital to set in place information systems that can deal with the magnitude of the change.

5. DESIGN, BUILD AND TEST THE NEW PROTOTYPEBefore any new product is launched, a prototype is tested out. A failure at a testing stage should never be implemented at a larger scale. BPR projects fail more often than not for a variety of reasons but a basic reason is the inability to identify and accept any limitations at the testing stage. Among other factors, both the management’s attitude towards the new way of work and the employees’ outlook towards the change should be carefully assessed.

6. ADAPTING THE ORGANIZATIONManaging change brought about by BPR activities is the final effort towards a successful project. Providing updated documentation, organizational structures, governance models as well as updated charts of authority and responsibility leave little room for confusion and allow a smooth transition into the new way of work.

Business process reengineering is a radical change activity that cannot be repeated if it goes wrong the first time. It is often a high risk activity that involves monetary investment and a risk of demotivated employees. In is essential to have buy in all the way from top management down and it should have a broad functional scope.

SUCCESSES AND FAILURES OF BUSINESS PROVESS REENGINEERINGIt is important to acknowledge and understand that BPR is not a foolproof method of success. As with all activities it runs the risk of failure.

A BPR program can be successful if:

Customer needs are made the priority and this vision is used to appropriately direct business practices.

There are cost advantages to be achieved that help the organization become more competitive in its industry

A strategic view of all operational processes is taken with relevant questions being asked about the established way of work and how it can be developed over the long term into more efficient business practices

There is a willingness to look beyond tasks and traditional functional boundaries with a focus outcomes. Through this, entire processes can be eliminated or amalgamated into fewer but more relevant and powerful processes throughout the organization.

There is a real desire to simplify the way of work by objectively assessing all activities and tasks and eliminating any that add less value and more complexity.

A BPR program will fail if:

It is seen as a way to make minor adjustments and improvements to existing processes. If there is no clear willingness to put all existing process onto the chopping block, there is no chance of success

It is seen as a one-time cost cutting exercise. In reality, cost reductions are often a handy by product of the activity but not the primary concern. It is also not a one-time activity but an ongoing change in mindset

There is no success in gaining dedicated long term commitment from management and the employees. Bringing people onboard is a difficult task and many BPR initiatives never take off because enough effort is not put into securing support

There is less effort to redesign and more to automate

One department is prioritized at the expense of the process.

There needs to be an openness towards studying every single process in detail and a willingness to change whatever is needed to achieve overall efficiency. There is too much internal focus and not enough of an eye on the industry and what competitor best practices can be used as benchmarks

SOME FAMOUS EXAMPLES OF BUSINESS PROCESS REENGINEERING

FORDIn his suggestions to Ford, Michael Hammer proposed something radical: Eliminate the invoice. In the new scenario, a buyer no longer needed to send a copy of the purchasing order form to the creditor administration. Instead, he registers an order in the online database. When the items appear at the store, the storekeeper check whether these correspond to the purchase order form in the system. In the old system he did not have access to this form. If the items match the order, he accepts them and registers this in the computer system. If they do not, the items are returned. Hammer reported that Ford benefited drastically from this change with an almost 75% decrease in workforce in the accounts payable department.

TACO BELLTaco Bell reimagined their business, focusing more on the retail service aspect and centralizing the manufacturing area. The K-Minus program was created and the meat, corn shells, beans, lettuce, cheese and tomatoes for their restaurants were now prepared in central commissaries outside the restaurant. At the restaurants, the prepared ingredients are assembled when ordered by a customer. Better employee morale, increased quality control, fewer accidents and injuries, bigger savings and more time for focusing on customer business processes are some of the successes of the new way of work. Taco Bell has gone from being a $500 million company in 1982 to a $3 billion company (Early 1990s).

HALLMARKHallmark used to spend 3 years in bringing new products to the market. With more niche markets identified Hallmark executives were convinced that the product development process needed to be redesigned. Using reengineering, the goal was set to change cycle time to one year. They discovered to their surprise that two thirds of the product cycle was spent on planning and conceptualizing the card rather than on printing and production rework as had previously been thought. The concept spent 90% time waiting for a creative staffer to complete a new iteration till it was eventually finalized, In 1991, a new line of cards was brought to market in 8 months, ahead of schedule, by creating a cross functional team for product development.

Although there have been many BPR success stories, the process became somewhat unpopular in the late 1990s. There were many organizations who went through the attempts to redesign processes but did not manage to reap any of the myriad benefits promised. So it is essential to plan carefully before undertaking this exercise. First and foremost, a business problem needs to be identified. Are we manufacturing at higher costs than our industry? Is there a newer way of work that we have not brought into our processes? Do our processes seem overly complex? Are too many people doing too many similar things? After setting clear objectives and securing support from all levels of management within the company, it is important to approach the process as one of continuous learning and to keep an eye on new and emerging problems as well the existing way of work. The success of any BPR initiative hinges on how deeply a process improvement mindset is created and nurtured by both management and the process owners themselves.

n the early 1990s, executives and managers welcomed information technology — databases, PC workstations, and automated systems — into their offices. They saw the potential for significant business gains. Computers wouldn’t just speed up processes or automate certain tasks — they could upset nearly all business processes and allow executives to rethink operations from the ground up. And so the reengineering movement was born.

Now it’s happening again. Powerful machine-learning algorithms that adapt through experience and evolve in intelligence with exposure to data are driving changes in businesses that would have been impossible to imagine just five years ago. The PCs and databases introduced during the reengineering of the 90s have grown up: the rules-based codes written by engineers are giving way to learning algorithms driven by the machines themselves. As a result, business processes are being machine-reengineered.

Algorithms aim to redesign business processes just like humans did during the original reengineering movement. Then, reengineering was limited by the speed of humans. Managers noted historical trends and revised processes, and engineers developed code that was then baked into computing systems. Every update or response to the market required multiple steps; it cost time and performance. Sometimes, by the time changes were in place, the market had already moved. With machine-reengineering, process changes are constant and driven not just by history but also by the predictive capabilities of machine-learning algorithms. Machine-reengineering asks that people train and actively manage the performance of the algorithms and data models that drive process change, rather than drive process change themselves.

Reengineering got off track by encouraging businesses to overhaul too many processes too quickly. Moreover, the reengineering rhetoric of “obliterate” was extreme and ultimately destructive not only to processes, but to businesses as well. Machine-reengineering seems to have so far avoided these mistakes. Businesses that machine-reengineer their processes focus on one core process at a time, and thus they can quantify positive outcomes.

In our study of more than 30 pilots in early-adopter companies, we found five common business processes improved by machine-reengineering.

That’s the proportional view of activities. How is all this machine reengineering actually paying off? Though this is just the beginning (we suspect many more processes will follow) we already see evidence of significant, even exponential, business gains in these three areas – improving cost performance, customer performance, and revenue performance.

Nearly half of early movers reported improvements to top-line performance. Most often, improvements came through automatically providing more timely predictive data to employees who interact with customers or sales prospects.

A San Francisco-based business services company noted shortcomings in the traditional reengineered approach to its sales and marketing process, in which Customer Relationship Management (CRM) databases were scoured for potential leads using relatively static algorithms. Algorithms couldn’t deal well with data decay, quality-assurance issues, and long turnaround times. But after machine-reengineering this process, the firm has access to up-to-date buyer behavior that lets them predict market segments with the biggest potential for growth.

The company calls the new process a “scientific revenue machine” or SRM. So far, it has helped to increase revenue 20 fold and unearthed market segments 2.5 times more likely to convert. Moreover, this machine-engineering has freed up the company’s data analysts. They’re now redirecting their attention toward developing new products, further enhancing revenue capabilities.

More than a third of early movers also saw gains in bottom-line performance using machine-reengineering to slash 15% to 70% of costs from certain processes. At the same time, some saw a tenfold improvement in workforce effectiveness or value creation.

In one dramatic case, a global consumer food company machine-reengineered the delivery of its products in a striking new way — significantly reducing costly accidents and delays. Previously, the standard approach to its risk management process included monitoring business assets and conducting root-cause analyses on truck accidents after the fact.

With machine-reengineering, the company has implemented Mobileye Collision Avoidance Systems, which uses an “intelligent vision sensor.” The systems scan the road while applying computer-vision algorithms. They continuously measure the distance of potential obstacles and speed of other vehicles and alert drivers to imminent dangers, improving reaction times. A pilot program reduced accidents due to insufficient headway by 40%. Forward collisions were reduced by 50%. And lane departure incidents were cut by 80%. Predictive powers gained by machine-reengineering are fundamentally improving the safety of operations.

About a fifth of early movers reported significant gains in customer satisfaction and engagement. Here, we can thank machine-reengineered processes for smoothing customer-service interactions, reducing process steps, or increasing human interaction in customer service situations.

For years, reengineering drove companies to move more and more customer service toward automation. Unfortunately, customers never warmed to audio menu options, computerized voices, and lengthy authentication processes. Machine-reengineered systems can improve these interactions.

Nuance FreeSpeech is a system that verifies a caller’s identity through the course of natural conversation, offering alternatives to caller identification, eliminating the cumbersome and seemingly redundant series of questions often used to confirm identity.

A Canada-based financial services group uses active biometrics called VocalPassword in both French and English. By using customers’ voices as passwords, up to four steps in the authentication process have now been eliminated. The company reports a 50% improvement in call routing.

By comparison, a European bank has deployed a passive form of voice biometrics used with high-net worth clients to speak to their financial advisor — the system simply listens and matches voice signatures as a conversation naturally progresses. Average call handling time has been reduced by 15 seconds, and customers are pleased: 93% of clients rate the system 9 out of 10.

Another organization, this one based in Australia, receives roughly nine million calls per year with 75% requiring authentication. It has introduced both passive and active voice biometrics so that conversations don’t begin with a long set of questions. The average call length has been cut by at least 40 seconds.

Machine-reengineering not only creates new workflows, but a wholly new model for thinking about work and processes. It has the potential to augment our thinking beyond cause and effect and allow us to understand, and then improve operations that are too complex for the human mind to manage, in some ways making the previously invisible visible. It will make processes far more agile, efficient and productive. If the early adopters are any indication, machine-engineering is a leap forward in the evolution of business processes. The rewards are there, waiting to be found.

We are passionate about our clients' businesses. We make sure that their business aspirations and expectations are met. We don't just talk, we effect change.

We introduce change in the form of projects to manage our clients' most critical issues and transform it into business operations to attain their corporate objectives.